Indonesia’s retail sales momentum remained solid, increasing 23.6% YoY in Apr, despite some uncertainties over its economic outlook. Lippo Malls Indonesia Retail Trust’s (LMIRT) recent 1Q15 results has reflected this positive retail sales trend, as its gross revenue and DPU grew 24.7% and 16.2% YoY to S$42.0m and 0.79 S cents, respectively. LMIRT has ample opportunities for inorganic growth ahead, as its sponsor Lippo Karawaci currently has 15 malls in the pipeline. Looking ahead, LMIRT believes the prospects for quality retail spaces in Indonesia remains bright over the next 12 months. Meanwhile, management has sought to reduce risks for unitholders, having hedged ~93% of its estimated net cash flows in IDR for the next two years. 100% of its borrowings are also on a fixed rate basis or hedged with interest rate swaps. We make no changes to our forecasts, HOLD rating and S$0.35 fair value estimate.
Indonesia’s retail sales momentum still solid
Despite some uncertainties over Indonesia’s economic outlook, the retail sales momentum remained solid, increasing 23.6% YoY in Apr, after growth of 10.9%-19.3% in Jan to Mar. Lippo Malls Indonesia Retail Trust’s (LMIRT) recent 1Q15 results has reflected this positive retail sales trend, as its gross revenue and DPU grew 24.7% and 16.2% YoY to S$42.0m and 0.79 S cents, respectively. In addition, rental reversions remained robust, coming in at 9.5%, while portfolio occupancy stood at 94.2%. LMIRT has ample opportunities for inorganic growth ahead, as its sponsor Lippo Karawaci currently has 15 malls in the pipeline. Lippo Karawaci has plans to expedite the development of its pipeline projects as well as asset enhancement projects in existing malls.
Prudent capital management in place
Looking ahead, LMIRT believes the prospects for quality retail spaces in Indonesia remains bright over the next 12 months, as both local and foreign retail players are still active. The average asking base rent in greater Jakarta rose 4.4% YoY to IDR315,898 psm per month in 1Q15, and Colliers International expects the asking base rent to increase on a full-year basis. Out of LMIRT’s 17 retail malls, 10 are located in greater Jakarta. Meanwhile, management has sought to reduce risks for unitholders, having hedged ~93% of its estimated net cash flows in IDR for the next two years. 100% of its borrowings are also on a fixed rate basis or hedged with interest rate swaps. With ~S$200m of debt maturing in Jul this year, LMIRT is in the process of refinancing this with either a term loan or fixed rate note issuance. Cost of debt is expected to remain stable.
Maintain HOLD
We make no changes to our forecasts, HOLD rating and S$0.35 fair value estimate. LMIRT is currently trading at FY15F P/B ratio of 0.86x and offers a distribution yield of 8.2%. The former is approximately one standard deviation above its 5-year forward mean of 0.77x, while the latter is in-line with its 5-year forward average of 8.1%.
Despite some uncertainties over Indonesia’s economic outlook, the retail sales momentum remained solid, increasing 23.6% YoY in Apr, after growth of 10.9%-19.3% in Jan to Mar. Lippo Malls Indonesia Retail Trust’s (LMIRT) recent 1Q15 results has reflected this positive retail sales trend, as its gross revenue and DPU grew 24.7% and 16.2% YoY to S$42.0m and 0.79 S cents, respectively. In addition, rental reversions remained robust, coming in at 9.5%, while portfolio occupancy stood at 94.2%. LMIRT has ample opportunities for inorganic growth ahead, as its sponsor Lippo Karawaci currently has 15 malls in the pipeline. Lippo Karawaci has plans to expedite the development of its pipeline projects as well as asset enhancement projects in existing malls.
Prudent capital management in place
Looking ahead, LMIRT believes the prospects for quality retail spaces in Indonesia remains bright over the next 12 months, as both local and foreign retail players are still active. The average asking base rent in greater Jakarta rose 4.4% YoY to IDR315,898 psm per month in 1Q15, and Colliers International expects the asking base rent to increase on a full-year basis. Out of LMIRT’s 17 retail malls, 10 are located in greater Jakarta. Meanwhile, management has sought to reduce risks for unitholders, having hedged ~93% of its estimated net cash flows in IDR for the next two years. 100% of its borrowings are also on a fixed rate basis or hedged with interest rate swaps. With ~S$200m of debt maturing in Jul this year, LMIRT is in the process of refinancing this with either a term loan or fixed rate note issuance. Cost of debt is expected to remain stable.
Maintain HOLD
We make no changes to our forecasts, HOLD rating and S$0.35 fair value estimate. LMIRT is currently trading at FY15F P/B ratio of 0.86x and offers a distribution yield of 8.2%. The former is approximately one standard deviation above its 5-year forward mean of 0.77x, while the latter is in-line with its 5-year forward average of 8.1%.
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